Businesses can expect better service as SAP puts house in order

In a dramatic turn of events, the SAP advisory board has not renewed Léo Apotheker's contract, forcing him to resign ...

In a dramatic turn of events, the SAP advisory board has not renewed Léo Apotheker's contract, forcing him to resign from the board and his role as chief executive.

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The result is a shake-up in leadership that will see a return to a joint CEO structure and day-to-day involvement of SAP co-founder Hasso Plattner. But what will this mean for customers?

Apotheker's departure has been linked with SAP's poor financial results and its controversial enterprise support plan. But some believe he was just in the wrong place at the wrong time.

SAP u-turn on enterprise support

In July 2008, SAP announced it would replace its standard and premium support plans with a single enterprise support programme and start moving customers to the new plan from January 2009.

The announcement triggered a strong backlash from customers, particularly those on standard support whose support costs would increase almost 30% by 2012, from 17% of the software cost to 22%.

Spurred on by customer anger over the planned price increases, the SAP User Group Executive Network (SUGEN) initiated high-level negotiations with SAP.

In November 2008, SAP announced that after the first price increase to 18.6% in January 2009, further increases would depend on achieving key performance indicators (KPIs) agreed with SUGEN.

In December 2009, SAP postponed the decision on whether or not to go ahead with the planned second price increase for 2010 and said it planned to hold further talks with customers.

In January 2010, SAP made an about-turn and announced it will return to a two-tiered system and reintroduce a standard support option priced at 18% of software cost.

"He entered a down market in charge of a sinking ship," says Ray Wang, partner at consultancy Altimeter Group.

The support plan was underway before Apotheker took over as CEO and the fact that he did not make his numbers can be blamed on the economy, says Gartner analyst Thomas Otter.

"His failure as CEO was in not being able to articulate SAP's technology vision clearly," he says.

To redress the problem, SAP is putting joint CEOs Bill McDermott and Jim Hagemann Snabe at the helm, moving CTO Vishal Sikka to the board and returning Plattner to an advisory role.

The new structure offers a lot of promise in restoring the important balance between sales and product, says Alan Bowling, chairman of the SAP UK and Ireland User Group.

"You need great product and you need to sell it well. By selling, I mean explaining products well, highlighting their value and ensuring that value is delivered," he says.

Technical developments

Bowling insists SAP has not lost it way on the technical side under Apotheker's watch, as suggested by some commentators.

Technical developments continue to come from the research teams to support the core product, he says.

These include SAP's enhancement packs, hybrid software-as-a-service, and products integrated with technology acquired from Business Objects.

"I hear a lot of criticism from software industry pundits, but I hear a lot of praise from the real users who know a lot more about the value being delivered," says Bowling.

Above all, the restructure indicates SAP is in the process of correcting itself, says Wang. "What will be key is the speed and clarity of its response."

In evidence of the self-correcting process, Plattner has admitted that SAP made mistakes, including the maintenance support plan, for which he accepted some responsibility.

"We have lost the track here and there. We will change this quickly," he said in a conference call with analysts.

Plattner's admission and recognition of the importance of smaller customers are the strongest indicators so far that the restructure will work to restore customer confidence, says Bowling.

If SAP is as serious about putting its house in order as it claims, customers can expect improved delivery of products, according to a clearer roadmap, and better sales support in explaining the business value of existing and future products.

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